This Environmental and Social Review Summary is prepared and distributed in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board of Director’s decision. Board dates are estimates only.
Any documentation which is attached to this Environmental and Social Review Summary has been prepared by the project sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content.

IFC has reviewed the current status of the project and the process followed to assess its environmental and social impacts. IFC’s appraisal consisted of:

- Site visits and inspections of facilities in Costa Rica, Nicaragua, and Guatemala; - Interviewing company senior management, operations managers, and support staff of key areas such as human resources and the legal department in Costa Rica, Nicaragua, and Guatemala; and - Reviewing of sample environmental and social documentation including environmental permits, government inspection records, and operational procedures and statistics.

Project description

Transamerica is the largest intermodal trucking company in Central America. It operates largest fleet of trucks and trailers in Central America and owns/leases container yards in Costa Rica, Nicaragua, Honduras, El Salvador and Guatemala. It has established itself in the market as being a reliable and efficient trucking company. The Project comprises: an upgrade and expansion of Transamerica’s freight hauling capabilities through purchase of vehicles; and the refinancing of some existing short and medium term debt.

Identified applicable performance standards

While all Performance Standards (PS) are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards:

- PS1: Social and Environmental Assessment and Management Systems- PS2: Labor and Working Conditions- PS3: Pollution Prevention and Abatement- PS4: Community Health, Safety and Security

The company has previously acquired land in Costa Rica and Nicaragua to be used for truck parking and maintenance and container storage and transfer. Land previously purchased has been vacant commercial land acquired from private parties and has not required resettlement. The company’s business plans do not include purchases in the near future and hence there are no plans to use the loan proceeds for land acquisition. As an investment in a trucking company, the project does not include development of new infrastructure or operations with potential impacts to biodiversity, indigenous peoples, of cultural heritage.

Environmental and social categorization and rationale

This is a Category B project because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. A mature, established, operating entity, Transamerica has incorporated a number of environmental and social concerns into its business processes. It has the operational and financial capacity to effectively manage environmental and social impacts from its projects mitigating potential impacts from on-going operations.

Key environmental and social issues and mitigation

Environmental Assessment and Management Systems:

The company’s principal assets are trucks, trailers, and container carriers which are purchased from the trade-in market in the US. They are evaluated for mechanical integrity prior to purchase and import into Costa Rica or other Central American countries where the trucks are registered. Once in Costa Rica or other Central American countries, trucks must pass a government-mandated emissions testing and safety inspection program in order to receive the circulation permits. The company also owns real estate in Costa Rica and Nicaragua and leases real estate in Nicaragua, El Salvador, and Honduras. Land acquisition due diligence is conducted by the company’s senior management with the support of local legal representatives who review land title history to identify potential liabilities. Current land holdings and leases consists of previously undeveloped vacant land.

Environmental and social aspects are incorporated into some of Transamerica’s business processes. Safety is first incorporated as part of the driver hiring process, as the company checks traffic and background records as well as recommendations from previous employers to ensure that drivers have the required experience and minimum standards of compliance with traffic rules. Company management also verifies hiring candidates’ driving skills through in-house driving test prior to hiring.

The company strictly assigns a specific truck to each driver so that if the truck is mechanically damaged or involved in an accident, the driver is reassigned to other tasks and must wait until repairs are done to drive again. This approach is combined with an award incentive for drivers who achieve certain mileage thresholds on a monthly basis to ensure that additional mileage is achieved on a sustainable basis while taking care of equipment and avoiding accidents. Given the high capital cost of trucks and other rolling stock, the company also has an aggressive preventive maintenance program that keeps track of the wear of key equipment components such as breaks, tires, and engine oil and programs their replacement within the programmed business cycle. All trucks are equipped with governors that limit the maximum speed and engines have a multipurpose computer system that continually records operational parameters including maximum speed, break use, etc. and which management can use to evaluate truck performance and operator driving habits.

Transamerica will complement its existing management program by formalizing certain occupational safety and environmental management functions within the organization. The driver safety management program will include a formal safety management organization consistent with the recommendations of an internationally recognized industry group, including a person designated as the corporate Director of Safety and others designated as regional Safety Supervisors at each of the major regional operations. The Director of Safety, with the assistance of the Safety Supervisors, will establish a formal driver safety program with policies, standards, and driver training materials. The program will define a high standard for safe driving performance that will be clearly communicated to new and existing employees and include such aspects as the development of written procedures for preventing accidents. The program will include an accident review committee that will investigate accidents, evaluate individual driver safety performance, and recommend areas for fleet safety improvement. The program will provide formal safe driver recognition and incentives to be widely advertised together with the driver productivity incentives currently in place.

Transamerica has a small management organization where responsibility for the management of social and environmental issues is assigned to various persons within the small management teams assembled in the company headquarters in Costa Rica and at each of the company’s subsidiaries in Nicaragua, Guatemala, and El Salvador. In Costa Rica, the management of labor and safety issues is assigned to the human resources manager and an in-house legal counsel, both of whom manage worker hiring and training activities. Responsibility for environmental issues such as fuel consumption and the disposal of solid and hazardous wastes is assigned to maintenance facility managers who keep track of the consumption of materials and generation of wastes. Driver and maintenance facility worker health and safety is also the responsibility of operations and facility management who reports to the legal department following occurrence of accidents

The company has an induction program for all employees providing an introduction to the history and nature of company operations. Workers in maintenance functions receive additional on-the-job training about company procedures specifically applicable to their area of responsibility, including occupational health and environmental aspects.

The company will formalize training activities for new and existing employees in key areas of occupational risk including driving safety and occupational health and safety of work in maintenance operations. New employees will be trained on company procedures as part of induction activities while existing employees will be trained on a rolling basis to coincide with assignment waiting periods or other periods of availability according to the company yearly business cycle.

Monitoring of accidents or injuries involving drivers, third parties, or maintenance operations employees is the responsibility of the corporate in-house counsel who reports directly to corporate operations management. Environmental are further monitored by line managers who keep track of waste generation and management activities (e.g. used oil generation, waste tire disposal, etc). The company currently depends on the outcome of compliance audits conducted by government entities in the areas of environment and occupational health and safety.

Transamerica will institute a formal internal auditing program that addresses driver safety, and health, safety and environmental practices of maintenance facility employees. Monitoring of maintenance facility employee practices will focus on accident prevention practices, the proper use and maintenance of personal protective equipment, and storage and handling of fuel and used oils.

The company will review the environmental operating licenses of third party waste management contractors handling waste oils on a yearly basis for validity and inquire about any environmental actions taken by regulatory authorities.

Information about driver accidents and injuries are reported immediately to company senior management as part of an emergency response procedure. Safety performance from maintenance facilities is also reported to company senior management. Senior management will be informed about the outcome of improvements in aforementioned monitoring activities on a yearly basis including the results of internal audits and compliance with company procedures and applicable regulations.

Labor and Working Conditions:

The company employs a total of approximately 700 workers in the four countries it operates. About 480 of these are drivers while the rest are maintenance shop technicians and administrative personnel. Over 50% of the workers hired are based in Costa Rica. The company provides employees with information about the terms of employment including rights under national labor and employment law, including their rights related to wages and benefits. In Costa Rica, this information is provided under a Direct Agreement signed by the company and elected worker representatives and reviewed and approved by the Ministry of Labor and under the individual employment contracts. In other countries this information is provided in Collective Agreements between the company and its workers and under individual employment contracts. The company is one of only a few companies in the transportation business which pay a base monthly salary to its drivers, providing additional incentives for total miles traveled. Due to security concerns for travel between Central American countries, company policy limits the number of working hours to daylight hours. Typical work schedules total about 48 hours per week although some local laws allow for maximum 12-hour shifts. Drivers who must stay away from home overnight also receive per-diem expenses to cover food costs.

Transamerica respects workers rights to form and to join workers organizations in the countries in which it operates as evidenced by the signing of a Collective Agreement between the company and the main workers unions in each respective country. Workers are able to express grievances through their labor representatives, supervisors, or directly to company management. Labor laws in all Central American countries where the company operates afford workers the opportunity to seek resolution for grievances not addressed by their employers. In Costa Rica, workers have a toll free number sponsored by the Ministry of Labor which allows for anonymous consultations about employer and employee labor rights.

The company applies non-discriminatory hiring practices and employee selection process is based on the experience and qualifications of the individual applying for a particular position in compliance with the non-discrimination requirements from the host countries. Vacancy announcements are posted in the local newspaper or via radio advertisements. The company complies with local laws prohibiting the use of pre-employment or post-employment drug testing even though this is a critical safety issue for truck operators globally.The company provides new employees at its maintenance and yard operations with induction training on health and safety issues, relying on the audits occasionally conducted by government agencies to verify compliance with local requirements. The company does not report any significant injuries or accidents in its maintenance and yard operations except for occasional minor cuts and bruises.

Pollution Prevention and Abatement:

The company is continually striving to increase the fuel efficiency of the fleet due to the significant cost of diesel fuel. Fuel efficiency improvement methods include such actions as route planning, continued preventive mechanical maintenance of each vehicle, and monitoring of tire wear and tire pressure. The company closely tracks fuel consumption across all routes and provides fuel based on the length of the trip to avoid over-consumption or fuel theft. Truck emissions are evaluated annually as part of government-required vehicle inspections and certifications. Emissions’ testing typically consists of a visual test for the presence of heavy black smoke. The company conducts mechanical maintenance activities at its Costa Rican, Nicaraguan, and Salvadoran operations generating limited types and quantities of effluents which primarily consist of truck washing effluents and stormwater runoff from truck yards and maintenance operations. Effluents from these sources are treated via oil water separators prior to discharge to external drainage systems.

Fleet maintenance activities result in the generation of approximately 92,000 liters (24,000 gallons) of waste oil per year. Waste oil is temporarily stored in 55-gallon drums for subsequent transport, treatment and disposal by external contractors. Waste oil in Costa Rica is transported by a third party and disposed of through use as supplemental firing fuel in a cement kiln. Waste oil removal and disposal from other operations is also performed by third parties. Operations also result in the generation of significant quantities of used tires. Tires changes associated with preventive maintenance are usually conducted in Costa Rica where they are disposed of through use as a supplemental firing fuel in a cement kiln.

The company will prevent waste oil spills by keeping waste oil and used oil filter storage drums closed when not being filled or emptied. The company will store waste oil drums on a spill containment pallet or similar spill containment structure to avoid accidental releases to soil and will protect them from rainfall. The company will also maintain spill containment kits and train workers in their use.

The company owns a 9-year old 22,000 liter underground storage tank (UST) for diesel fuel equipped with overfill protection, located at the Costa Rica headquarters. The UST is permitted and occasionally inspected by Costa Rican environmental authorities. The operation of the fueling facility in Costa Rica is subcontracted. Fueling operations are other facilities are also subcontracted to third parties although they are either performed with the use of above-ground storage tanks or at third party, commercial, locations.

The main source of atmospheric emissions consists of the combustion emission from the transport fleet operated by the company. Additional emissions sources include indirect emissions from the production of electricity for own consumption, mainly the operation of reefer containers at the company’s various storage yards. Screening estimates from all of these sources indicate that total GHG emissions are below 100,000 ton-CO2 equivalent per year.

Community Health, Safety, and Security:

The company incorporates driver safety into various aspects of the business process including the driver hiring process, as the company checks traffic and background records as well as recommendations from previous employers to ensure that drivers have the required experience and minimum standards of compliance with traffic rules, and through verification of candidates’ driving skills through in-house driving test prior to hiring. The company also has an aggressive preventive maintenance program that keeps track of the wear of key equipment components such as breaks, tires, and engine oil and programs their replacement within the programmed business cycle. All trucks are equipped with governors that limit their maximum speed. The company is joining forces with its main competitors in Costa Rica to sponsor a training program for new, young, drivers at Costa Rica’s main vocational training center, the National Training Institute (INA). The first group of 27 graduates is expected for 2007 with 9 of these destined for hiring by the Company. The Company does not report any driver fatalities or serious injuries over the last three years although fatalities involving third parties have been reported in Costa Rica, Nicaragua, and Honduras.

The company will include a detailed analysis of accidents into its driver safety management program to incorporate the lessons learned into a more rigorous driver training program for new and existing drivers.

The company trucks are sometimes required to transport cargo containing hazardous materials. The company has a procedure which requires its clients to disclose and provide information about hazardous contents of the shipment. Hazardous shipments are placarded and transported with a bill of lading and drivers are sometimes trained by company clients.

The company will incorporate special provisions and procedures for the management of shipments containing hazardous materials in the overall driver training program.

The company has an emergency response procedure with clear internal and external reporting requirements in the event of an accident or mechanical breakdown. The procedure relies on transit authorities to respond to serious cases while the company has a system in place to respond to mechanical breakdowns using internal resources. The procedure includes a contact list and the location from which equipment should be provided depending on the geographic location of the breakdown. The emergency preparedness and response plan will be updated to include procedures to prepare and respond to accidental releases of hazardous materials.

The company contracts the services of external security services to control access and egress of personnel and equipment from its operations in Costa Rica, Nicaragua, and El Salvador. Security guards are typically unarmed. The highest security risks are associated with truck highjacking and cargo theft which have become an issue for the trucking industry during nighttime transport activities primarily in Nicaragua, El Salvador, and Honduras. The company policy now prohibits nighttime operation along high risk routes and some clients provide armed escorts who accompany drivers either in the cab or on separate vehicles.

The company will make reasonable inquiries to satisfy itself that the companies and individuals hired by its clients to provide armed security for the escort of company trucks have not been implicated in past abuses, and are adequately trained in the use of force and appropriate conduct toward workers and the local community.

Client's community engagement

Given the nature of the company business, including the fact that truck terminals are located in predominantly industrial and commercial areas, there are limited opportunities for community engagement.

The General Manager has an open door policy to address community complaints, often meeting directly with complainants. Community complaints seldom occur but may occasionally be presented by neighbors or be associated with traffic accidents involving members of the public or other third parties. Complaints related to the yard operations have been very few over the last three years, limited to issues associated with noise from trucks or auxiliary generators from reefer containers, dust from truck operations, vegetation management along property perimeters. These complaints have been effectively managed to the mutual satisfaction of the company and its neighbors. The company name is clearly advertised in all of the truck units as well as entrances to truck and container storage yards, further facilitating the identification of the company by interested parties.

Complaints or other issues related to traffic accidents are addressed by the General Manager who may resolve them directly with the complainant or refer them to external legal counsel if they must be resolved legally or through the court system. Issues related to traffic accidents are also always investigated by traffic authorities in Costa Rica and elsewhere.

IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring them to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities.

In addition, Affected Communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC. The CAO is mandated to address complaints from people affected by IFC-supported business activities in a manner that is fair, objective, and constructive, with the goal of improving environmental and social project outcomes and fostering greater public accountability of IFC.

Independent of IFC management and reporting directly to the World Bank Group President, the CAO works to resolve complaints using a flexible, problem-solving approach through its dispute resolution arm and oversees project-level audits of IFC’s environmental and social performance through its compliance arm.

Complaints may relate to any aspect of IFC-supported business activities that is within the mandate of the CAO. They can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC-financed business activity. Complaints can be submitted to the CAO in writing to the address below: